Northern Beef: More Than Half of $1M Grant Diverted

More than half of a $1 million South Dakota grant given to Northern Beef Packers to cover construction and equipment costs was improperly diverted to pay immigration loan monitoring fees, state officials said Friday.

Attorney General Marty Jackley said $550,000 of the grant from the Department of Tourism was used to pay fees for SDRC Inc., a private company contracted by the state to handle federal EB-5 investments. The EB-5 program, which offers easier immigration to foreign investors, helped fund the failed beef plant in Aberdeen and other large projects.

No state or federal charges have been filed. Jackley said his office would continue to assist the U.S. Attorney's Office and the Department of Justice, which have "primary authority over federal immigration law and the EB-5 program."

Jackley's report came in response to Gov. Dennis Daugaard's request to look into possible financial misconduct prior to his administration.

The attorney general also found that former economic development director Richard Benda double-billed the state for two 2009 flights to China and one 2010 flight to Las Vegas totaling about $5,500. Benda was found dead Oct. 22 with a 12-gauge shotgun wound to his abdomen, and officials on Thursday ruled his death a suicide.

"Because the individual who submitted the vouchers is deceased, there will be no further action by the Attorney General's Office on the voucher matter," Jackley wrote.

Rep. Kathy Tyler, D-Big Stone City, said Friday that the double-billed vouchers and diverted funds are just the "tip of the iceberg," and every dollar that went through the EB-5 program needs to be tracked.

Tyler said she's working with the Legislative Research Council to draft a petition to call a special session of the South Dakota Legislature to authorize an independent forensic audit of the EB-5 program in South Dakota.

"South Dakota taxpayers have invested heavily in these projects only to lose millions of dollars," she said. "We need to know where the taxpayers' money went and how SDRC interacted with state government."

Daugaard said Friday that federal investigators contacted the Governor's Office of Economic Development last spring and requested certain travel vouchers filed by Benda during his time as a state official.

"I was not aware of this federal investigation until their request was received, and I still do not know the nature or extent of the federal investigation," Daugaard said in a statement. "I am aware, however, of numerous media reports indicating that there may be an ongoing federal investigation involving Northern Beef Packers and the EB-5 program."

The South Dakota Governor's Office of Economic Development for years contracted with SDRC Inc. to administer the federal EB-5 program, in which foreign investors can secure permanent residency for as little as $500,000. The economic development office canceled its contract with SDRC in September "for cause."

As economic development director under former Gov. Mike Rounds, Benda was active in promoting South Dakota opportunities to overseas investors. After leaving that post when Daugaard replaced Rounds, Benda went to work for SDRC as a loan monitor representing Korean and Chinese investors in the Northern Beef Packers plant.

Northern Beef filed for Chapter 11 bankruptcy protection in July and is idled pending a Dec. 5 auction.

Daugaard said Benda's death leaves questions that may never be answered.

Tyler said published reports are asking way more questions than the attorney general and governor's office are providing.